The world as we know it is becoming more business-oriented by the day. More and more people are trying to become entrepreneurs and run businesses rather than work for someone else. The primary requirement for starting any business is capital. Personal Loans are considered one of the best options to start a new business. While you are right to be thinking of a Business Loan for initial setup costs for your business, a Personal Loan has its own set of advantages that give it some edge over conventional Business Loans.
Through a Personal Loan, you get a lump sum amount, at a fixed personal loan interest rate, without giving any collateral. It is easy to avail, with a hassle-free application process and has other advantages for raising business capital. Let us look at some of them:
1. Low Interest Rate
While a Personal Loan’s interest rate varies based on your lender, it also depends on your credit score. If you have a credit score of more than 750, you can get a Personal Loan at a lower interest rate. Non-banking financial companies (NBFCs) like Poonawalla Fincorp give you a Personal Loan at an interest rate starting from 9.99% per annum.
2. Quick Approval Rate
The process of getting a Personal Loan is simpler and quicker as compared to other loans. While something like a Home Loan will take around 3-4 weeks to be processed, many financers approve Personal Loans within 24 hours if you have the required credit score. It is especially advantageous if you have an urgent business need, be it getting more raw materials or paying your employees on time: you can get it done almost immediately without delay.
3. Zero Collateral Required
A Personal Loan is especially beneficial for businesses that have started recently and don’t have much to show concerning sales and profits. To grant a Business Loan, NBFCs usually check the track record and financial statements of the respective business in question. A start-up might not have these things, so taking a Personal Loan can come in handy. You are not required to give any collateral for a Personal Loan, which gives it a major edge over Business Loans.
A Personal Loan demands zero answers concerning how you plan to use the funds. While for a Business Loan, you have to explain the utilisation plan of the loan. It also acts as a criterion on whether the loan will get approved by you or not. A Personal Loan requires no such thing, and you are free to use the funds according to your requirements.. This is a major reason many people opt for a Personal Loan for business related finances.
5. Flexible Loan Disbursal Time
Another advantage of a Personal Loan is choosing the disbursal limit. You can select the most suitable plan for yourself, which you can repay over a tenure of your choosing. It can range from 12 to 60 months or more, depending on the plan that you select for yourself. This also gives you a target to work on as a businessman, an automatic deadline within which you have to generate the required revenue, which will help you plan your business and make the right moves.
So, these are some of the advantages of taking a Personal Loan for your business. It will help if you research before zeroing in on the place you want to get finance from, and the plan you want for your Business Loan.
You should also ensure that you match the eligibility criteria for and have all required documentation to avail it. Most financial institutions only require your PAN card details, address proof, account statements of the previous three months, income proof, and your latest photographs as documents for the loan. Keep them ready, and you are all set to secure your loan and start your business.